Canadian Auto Industry

Recently, Chrysler also pointed out that the Canadian auto manufacturing sector is in danger of losing automakers.

With the increasing value of the Canadian dollar, automakers producing vehicles in the country can no longer take advantage of huge profits from importing the vehicles into the United States. In the past, automakers have set up vehicle assembly facilities in Canada as they can build vehicles in the country at lower wages and raw material price. But with the soaring loony, importing vehicles from Canada into the United States does not necessarily translate to huge profits. In fact, Canadian auto buyers are looking more and more at purchasing vehicles in the United States.

LaSorda pointed out that to build an assembly facility in Canada that will produce 200,000 vehicles per year would cost about $800 million. That figure is much higher than what it would cost if the new assembly facility will be built in China or Mexico. If a new vehicle manufacturing plant is built in China which can also produce 200,000 vehicles annually, it will only coast $250 million and in Mexico, around $450 million. That disparity is what LaSorda is warning Canada about.

“We can get approvals in other states here much faster than in Canada,” added the Canadian-born LaSorda. “If you’re competing with an investment in different locations and others are faster, you lose out.”

With the United Auto Workers union agreeing to lower contracts from automakers, it is expected that Canadian manufacturing facilities have lost its bargaining chip. After the contract with the UAW was signed, it was official that wages in Canada are $25 an hour better than in the United States. Thus, automakers will no doubt look to just build vehicles in the United States if they are forced by Canada to maintain the wages. If that happens, it will negatively affect the Canadian auto industry.